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Thorley Wealth Management, Inc. Elizabeth Thorley, MS, CFP®, CLU®, AIF®, AEP® CEO & President 1478 Marsh Road Pittsford, NY 14534 585-512-8453 x205 Fax: 585.625.0477 [email protected] www.thorleywm.com Settling an Estate March 01, 2019 Page 1 of 6, see disclaimer on final page

Settling an Estate - thorleywm.com · Hire an attorney or other advisors You may want to hire an attorney to help settle the estate, but other professionals such as accountants or

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Page 1: Settling an Estate - thorleywm.com · Hire an attorney or other advisors You may want to hire an attorney to help settle the estate, but other professionals such as accountants or

Thorley Wealth Management, Inc.Elizabeth Thorley, MS, CFP®, CLU®, AIF®, AEP®CEO & President1478 Marsh RoadPittsford, NY 14534585-512-8453 x205Fax: [email protected]

Settling an Estate

March 01, 2019Page 1 of 6, see disclaimer on final page

Page 2: Settling an Estate - thorleywm.com · Hire an attorney or other advisors You may want to hire an attorney to help settle the estate, but other professionals such as accountants or

Settling an Estate

March 01, 2019

What is settling an estate?Definition of estateWhen people die, they usually leave behind money and other things of value (assets). In addition, they may have auto loans,mortgages, and other outstanding debts (liabilities). Together, the assets and liabilities left by a decedent are known as the estate.Settling an estate means that someone follows the legal and administrative procedures set up to pay the liabilities of the estateand distribute the remaining assets to the rightful beneficiaries.

Who settles an estate?An estate is settled by the executor named in the decedent's will. Typically, the executor is the spouse or a close family memberof the decedent, but may be another party. If the decedent left no valid will or the named executor fails to serve, the probate courtwill name an administrator to fulfill those duties. If you have been named executor in a will or appointed as the administrator of anestate, you are responsible for carrying out the terms of the will (if there is one) and settling the estate, either alone or with thehelp of an attorney.

Is settling an estate complicated?Settling an estate may be tedious and time-consuming, but not necessarily complicated. It depends on the value of the estate, thestate in which the decedent lived, and whether you must go through probate. Probate is the court-supervised process of provingthe authenticity of the will and executing its terms. Formal probate may not be required if the decedent's property is worth lessthan a certain amount, or if all the assets are nonprobate assets. If minimal probate proceedings are required and there is nochallenge to the will, settling an estate can be a relatively simple matter.

Do you need an attorney to help you?If you are the executor, you aren't required to hire an attorney to help settle the estate, but you might consider it if the estate iscomplex or if you don't have the time, energy, or expertise to handle it yourself. If you hire an attorney, remember that he or sheworks for you, not for the estate, and that you are still the fiduciary. Be sure that you trust him or her to do a good job, and that youunderstand how the fees will be paid. In general, attorneys charge either by the hour or a lump sum, and the estate pays their fee.However, some states allow attorneys to take a percentage of the estate, an arrangement that can be quite expensive.

If you feel that you can settle the estate without much help, you should consider hiring an attorney as an advisor only. He or shewill look over documents you prepare, give you specific advice in certain areas, and charge you an hourly rate for those limitedservices.

How to do itHire an attorney or other advisorsYou may want to hire an attorney to help settle the estate, but other professionals such as accountants or financial advisors canalso help with specialized issues. Such issues may include paying income and estate taxes, accounting for estate debts andexpenses, and collecting insurance and pension benefits.

Locate and read the willFinding the will should be relatively easy. You may already know where it is located. Otherwise, you may be able to look in thedecedent's safe-deposit box, a file cabinet, or with the decedent's attorney or other family members. When you have found thewill, read it to make sure who the executor is, as well as who the beneficiaries are. In addition, try to determine if the will you'vefound is the most recent version since more than one version may exist.

Tip: If your spouse left no will or if the will is invalid, he or she is said to have died intestate . The probate court will establish whothe legal heirs are under your state's intestate succession laws and may appoint you as administrator.

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Page 3: Settling an Estate - thorleywm.com · Hire an attorney or other advisors You may want to hire an attorney to help settle the estate, but other professionals such as accountants or

March 01, 2019

Caution: If the decedent has a safe-deposit box, his or her bank may seal it at the time of death and may deny entry, even if youare the decedent's spouse. However, an exception might be made if you are a joint or cosigner for the box and have a key. Toopen the safe-deposit box, you may have to get court authorization. For this reason, either don't store your will in a safe-depositbox or have another copy stored someplace else, for example with your attorney.

Carry out funeral arrangementsComplete the funeral arrangements. Most states have a five-day waiting period before you can begin any other work to settle theestate anyway.

Gather paperwork and documents you will needTo settle the estate, you will need to have the original or certified copies of some or all of the following documents: the decedent'swill, birth certificate, marriage certificate, death certificate, Social Security number or card, military discharge papers, and divorcepapers. You will also need to make a list of assets (such as bank accounts, trusts, securities, real estate, insurance policies,retirement plans, business interests, and personal property) owned by the decedent at death, and find any paperwork thataccompanies these assets (such as deeds, mortgages, titles, registrations, and loan paperwork).

Determine if probate will be necessaryTo determine if probate is necessary, check with your attorney or your state's probate court clerk (for the phone number, look inthe government listing section of your telephone directory). One of these sources should be able to tell you how your statedetermines if probate is necessary or guide you to the necessary resources. Many states have simplified probate procedures ordo not require formal probate of property worth less than a certain amount. In general, however, probate may be necessary ifthere are probate assets. A probate asset is property that does not automatically pass to a beneficiary and is distributed by theterms of the will. Nonprobate property automatically passes to a beneficiary, either because the property is held jointly or becausethe beneficiary has been specifically designated as beneficiary in another document (a life insurance policy or pension plan, forinstance).

Example(s): When Hal died, he left his entire estate to his wife, Jane. His estate consisted of a house worth $150,000, a bankaccount worth $12,935.46, and a $50,000 life insurance policy. The house was held in the name of Hal and Jane as joint tenantswith rights of survivorship. The bank account was held jointly by Hal and Jane. Jane was the named beneficiary of Hal's lifeinsurance policy. None of his estate was subject to probate because all of Hal's property legally passed to Jane automatically.

Caution: Some bank accounts held jointly may not pass automatically to the other joint account holder. It depends on the wordingof the account and the intent of the owners at the time the account was opened.

Apply for probateIf the estate is subject to probate, you must initiate proceedings by filing a petition to probate the will or administer the estatebefore the probate court. You can get this petition from the clerk of the court. You will then file the petition and the will with thecourt, along with a list of probate assets.

Notify all interested parties that probate has been initiatedYou must locate and notify all interested parties (e.g., heirs at law and beneficiaries named in the will) that probate has beeninitiated. Even if you are the spouse of the decedent and sole beneficiary, many states require that you notify anyone who wouldbenefit if there had been no will because they may have reason to challenge the will or they may have a more recent copy of thewill. Since the length and type of notice you must give varies from state to state, check your state's laws to determine whatnotification procedure you must follow.

Open a bank account in the name of the estateYou may need to open an estate checking account to pay any bills or accept money owed while the estate is being settled. Youmay also need to obtain court permission to do this. As executor, you can deposit checks made out to the decedent to thisaccount, as long as you endorse them. If you have questions regarding this, talk to the bank or your attorney.

Apply for a Taxpayer Identification Number (TIN) and any state ID number required

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March 01, 2019

Each TIN applicant must (1) apply using the revised Form W-7, Application for IRS Individual Taxpayer Identification Number, and(2) attach a federal income tax return to the Form W-7. Applicants who meet an exception to the requirement to file a tax return(see the instructions for Form W-7) must provide documentation to support the exception.

Send your Form W-7 and proof of identity documents to Internal Revenue Service, Austin Service Center, ITIN Operation, P.O.Box 149342, Austin, TX 78714-9342. You may also apply using the services of an IRS-authorized Acceptance Agent or visit anIRS Taxpayer Assistance Center in lieu of mailing your information to the IRS in Austin.

Arrange notification of creditorsDepending on the laws of your state, you may need to publish a legal notice (usually in the local paper) to notify creditors (andother interested parties who may have received the notice personally) of the decedent's death. In addition, you may be required tomail a notice to each known creditor individually. Depending on your state's laws, creditors may have as much as one year to filea claim against the estate.

Notify institutions and agenciesSend notices of the decedent's death to the post office, banks, utility companies, the Social Security Administration, and otherinstitutions that should be informed.

Collect debts owed to the estate and pay creditorsThe executor or administrator will have to both collect money owed to the decedent or the decedent's estate and pay any bills ordebts of the estate. Money owed to the estate might include unpaid salary, insurance benefits, employee benefits, governmentbenefits, or pensions. Bills or debts of the estate might include credit card bills, funeral expenses, medical bills, advisors' fees, andloan payments. If you are the spouse of the decedent, you may need help from your advisor to determine what debt is yoursalone, what is joint debt, and what is your spouse's debt.

Caution: If you are the spouse of the decedent, don't pay any bill unless you are certain it is legitimate. When the death noticeappears in the newspaper, you may be targeted by con artists who will ask you to pay phony expenses. Before paying anycreditor, ask to see a copy of the original invoice and check it thoroughly. Be particularly wary of any request made by telephone.Never give out any personal or financial information over the phone (including your Social Security number or credit cardnumbers).

File any insurance claims on the decedent's lifeFile any insurance claims on the decedent's life.

Periodically check in with the courtYou may occasionally need to obtain the probate court's permission to spend estate funds. You may also be required to filereports with the court regarding how estate funds are spent. Also, you may need the court's permission to sell estate property.

File tax returnsYou may have to file state and federal tax returns, including Form 1040 (U.S. Individual Income Tax Return), Form 1041(Fiduciary Income Tax Return), and, if the gross estate is large enough, Form 706 (U.S. Estate Tax Return). In addition, your statemay impose state death taxes (e.g., an inheritance tax).

Make estimated tax paymentsYou may need to make estimated tax payments for the estate for any tax year ending two or more years after the decedent'sdeath.

File papers to finalize the estateYou may need to file a final account with the court that details all estate income, expenses, and administration costs. The courtapproves this final accounting. This finalization may take place a year or more after probate is initiated because of the length ofthe probate process.

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March 01, 2019

Distribute assets to the beneficiariesNonprobate assets pass automatically to the beneficiaries, but probate assets can only be distributed after all claims, debts, andtaxes are paid, and the probate process is complete. When distributing the assets to the beneficiaries, you must follow instructionsgiven in the will as well as those required by the probate court. Once the estate is distributed, the court closes the estate anddischarges you as executor.

Caution: If you are the spouse of the decedent, be aware that until the court has officially awarded the property to you, you areforbidden to sell or gift your spouse's property, even if you feel that you are now the rightful owner. You can't even give theproperty to your children until the estate settlement process is complete because there may be challenges to the will or aninventory might need to be taken.

Questions & AnswersIf one spouse dies without a will, how does the surviving spouse settle his or herestate?You can settle an estate without a will, but the laws of your state will determine how your spouse's property is distributed. Theselaws are called statutes of descent and distribution. You may be appointed as administrator of the estate, but it's possible for thecourts to appoint someone else, which will give you less control over estate management. For advice and information, consult anattorney.

If you are named as executor, can you decline to serve?No one can be forced to serve as executor. You can simply decline the responsibility. An alternate executor named in the will maytake over or the court will appoint someone.

Does a relative named as executor get paid?An executor is entitled to a fee equal to an amount determined by state law or whatever the probate court determines is areasonable amount. Typically, relatives of the decedent usually decline payment for their services, even though they are notobligated to do so.

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Page 6: Settling an Estate - thorleywm.com · Hire an attorney or other advisors You may want to hire an attorney to help settle the estate, but other professionals such as accountants or

Thorley Wealth Management, Inc.Elizabeth Thorley, MS, CFP®, CLU®,

AIF®, AEP®CEO & President

1478 Marsh RoadPittsford, NY 14534585-512-8453 x205Fax: 585.625.0477

[email protected]

March 01, 2019Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2019

Securities and advisory services offered through Commonwealth Financial Network memberwww.FINRA.org/www.SIPC.org , a Registered Investment Adviser. Fixed insurance products andservices offered through CES Insurance Agency. This material has been provided for generalinformational purposes only and does not constitute either tax or legal advice. Investors shouldconsult a tax or legal professional regarding their individual situations.

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